Saudi Arabia’s Department of Zakat and Income Tax has recently published its Value Added Tax Implementing Regulations. Although regulations in other GCC countries may vary slightly, it is safe to assume that the overall VAT structure will be similar if not identical across all GCC countries.

Main Highlights

Companies with “Supplies” exceeding the “Mandatory Registration Threshold” will have to register with the Department of Zakat and Income and get a VAT Registration Number.

The VAT rate is 5%.

Related party transactions will be taxed at the fair market value of the transaction.

VAT payments will have to be made either monthly or quarterly depending on the annual value of taxable supplies.

In case of overpayments, refunds will be allowed for any amount of tax above 1,000 SAR.

Tourists and other “Eligible Persons” will be allowed to get VAT refunds.

Exempt Transactions

Business gifts under 200 SAR/gift. The maximum annual value of gifts for an entity is 50,000 SAR based on the fair market value of the gifts.

Financial services (conventional and Islamic) including:

the issue, transfer or receipt of, or any dealing with, money, any security for money or any note or order for the payment of money;

Lease or license of Residential Real Estate (commercial real estate, hotels and inns are not included in this exemption)

Goods and services exported/sold outside the GCC

International transport of goods/passengers

Qualifying Medicines and qualifying medical equipment

The first supply of a gold, silver, or platinum with 99% purity by its Producer or Refiner

To many companies, the introduction of VAT will pose significant financial challenges. The accounting policies and infrastructure will all have to be adapted to the new requirements. H.A. Consultancies can provide both the financial expertise and the accounting infrastructure required to have a smooth and successful transition.

For more information, please don’t hesitate to contact H.A. Consultancies at any of its offices in Bahrain, Oman, Saudi Arabia, or Dubai.